Sony, Vivendi may post losses as sales plummet

BLOOMBERG , NEW YORK

The music units of Sony Corp, AOL Time Warner Inc and other record companies won't be profitable this year if album sales decline at the same rate as last year, said Howard Stringer of Sony Corp of America.

Music sales to US retailers and clubs fell 10 percent last year to US$13.7 billion as more people copied CDs and retrieved songs for free from the Internet, the Recording Industry Association of America said last month.

"The record companies won't make a profit'' in their next year of reported earnings if sales fall 10 percent again, and that includes Sony, Sony Corp of America chief executive officer Stringer said in an interview yesterday. Sony's next fiscal year begins in April.

Last year, Vivendi Universal SA's Universal Music Group led in US sales, followed by AOL Time Warner's Warner Music Group, Sony's Sony Music Entertainment, closely held Bertelsmann AG's BMG unit and EMI Group Plc, according to SoundScan, which tracks US retail sales of music. These companies distribute about 90 percent of all recorded music.

Stringer was elaborating on remarks made yesterday during a live TV broadcast of "Silicon Summit III," a panel discussion of information-technology CEOs on MSNBC, the cable-TV channel jointly owned by General Electric Co and Microsoft Corp.

Lower music sales stem in part from the use of free Internet sites such as Morpheus and AudioGalaxy. Record companies have been slow to offer music over the Internet largely because of security issues.

"As hard as we struggle to find a solution to this problem, I don't think we will find it" in the next year, Stringer said. "And we certainly will not find it unless we get help from Intel and other" technology companies, he said.